Nabucco Gas Consortium Optimistic Despite Piling Doubts

The management of the consortium that plans to build the Nabucco natural gas pipeline from Turkey to Austria remains optimistic that the concept will eventually become a reality, even though it’s still nothing more than a zigzagging line drawn on a map. The consortium’s members are less enthusiastic.

The pipeline was originally designed to be 3,900 kilometers long and deliver 31 billion cubic meters of natural gas a year from the Middle East to Austria. It became a pet venture for the European Union after price disputes between Russia and the Ukraine interrupted gas transit in recent years, highlighting the need for alternative supply sources.

But more recently interest has dwindled and Nabucco still doesn’t have a finalized trajectory, a budget and, most importantly, a source of gas to feed the pipes.

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“Almost 10 years ago when we entered Nabucco and it was a promising a project,” said Jozsef Molnar, chief executive of Hungary’s MOL Nyrt., the Hungarian oil firm that owns Foldgazszallito, a member of the consortium. “Its primary purpose was to deliver natural gas from Iran to the European market,” he said.

However, political concerns regarding Iran meant that Nabucco started looking for alternative sources of supply and is now trying to reach an agreement in Azerbaijan with the consortium developing the Shah Deniz II field. Nabucco competes for Azeri gas with two other pipeline ventures.

“The negotiations between the Nabucco Shareholders and the Shah Deniz II consortium are ongoing. No decision has been made yet. We are confident that we have submitted the most competitive offer to Shah Deniz II,” Christian Dolezal, director of communications and public affairs at Nabucco, told WSJ Emerging Europe.

Not all consortium members are as confident. Juergen Grossmann, chief executive of Germany’s RWE AG, said recently that his company could scrap its plans for Nabucco.

“For the time being, there is no obvious source of gas and there is also much uncertainty about the volume of the necessary investments. As such we can’t even begin to discuss the project’s returns,” Mr. Molnar of MOL said, adding that he sees no hope for progress without a source of supply.

Gerhard Roiss, chief executive of Austrian consortium member OMV AG, said late February that the Shah-Deniz consortium will make a decision on which bid it will accept by mid-2013.

Despite the disheartened remarks from Mr. Molnar, Nabucco is still counting on its Hungarian partner.

“We have the full commitment of the Hungarian shareholder, Foldgazszallito,” said Gabor Bercsi, managing director of Nabucco Hungary.

One of the main beneficiaries of the high hurdles facing Nabucco is its Russian rival South Stream. The pipeline will deliver gas from the Caspian region and is in a more advanced state of preparation, scheduled to start deliveries in 2015.

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